Q&A: Bill Gates

Q&A: Bill Gates

So why couldn’t huge, regular, dependable investments from your foundation make a difference?

In energy, we might have some involvement where it’s connected to things that wouldn’t happen for poor people otherwise. There may be some particular biomass approaches for getting local energy out where there’s no roads and infrastructure-there might not be a market signal for that type of innovation. You know, the poor people are the ones who are going to suffer the most from climate change. It’s unfortunately the poor people of the world who live in tropical zones, and there’s a variety of reasons for that. But that’s where agricultural productivity is already barely good enough for survival. Think of people in places like Ethiopia, Somalia, Sudan. There, climate change will clearly reduce productivity without some big innovation in the seeds and the approaches.

But I’ve put money into Vinod Khosla’s venture fund. I’ve put money into Nathan Myhrvold [and his Intellectual Ventures Fund]. Nathan has this thing that invents ideas broadly, many of which are energy-related. And some of those energy-related things will result in startups. One has so far: this amazing, wild nuclear [reactor design company], TerraPower.

Let me ask the question more generally, then. If energy research is underfunded by at least $11 billion according to the AEIC, what is a better approach to funding new energy technologies? Or is this one of these problems that will require a variety of approaches–traditional, academic, agency, VC, corporate–because it’s so big a problem that it requires the cooperation of everyone involved?

Well, yeah. I mean, you need cooperation, you need independent inventors, you need everything. It’s not a problem that lends itself to a Manhattan Project-type approach. It has to be low cost and usable in different circumstances. You can’t just get a bunch of smart people together and know which path you should go off and pursue. It’s amazing that that worked for the Manhattan Project.

It worked because it had a very specific end: they wanted to build the biggest bomb in the world and end the war.

They knew what they wanted to do. I guess in a vague sense we can say that we want energy that costs, say, a quarter of what coal or electricity does and emits zero CO2. We can write that down. But there’s many paths to get there, each of which a realist would look at and say, “Wow, there’s a lot of difficult things along that path.” So I think it’s very important, both to give poor people cheap energy and to avoid hugely negative climate change, that the U.S. government and other governments fund basic research. But unfortunately, when the U.S. doesn’t step up on basic research, the world at large doesn’t tend to step up and fill the gap. I wish they would, but they don’t.

The irony is that if you actually look at the amount of money that’s been spent on feed-in tariffs and you properly account for it–tax credits, feed-in credits in Spain, solar photovoltaic stuff in Germany–the world has spent a massive amount of money which, in terms of creating both jobs and knowledge, would have been far better spent on energy research. But it kind of shows up as “Okay, I’m paying a little more for electricity,” which is a very complex, opaque thing. Where you’re mixing in low-cost hydro sources or things that have been fully depreciated with new things that are very expensive, it’s very complicated; when people are actually subsidizing some deployment, they don’t see it as much. Whereas if you say “Okay, we need to raise a tax to fund the R&D,” that’s more explicit.

I was stunned, when I did the work with the AEIC, to see that if you wanted the U.S. energy industry as a whole to fund this R&D, you’d only have to tax energy 1 percent. That is, the amount of tax you’d need to fund the R&D is an order of magnitude less than the amount you’d need to increase the price of energy in order to start to have a strong price signal in terms of efficiency and tradeoffs in new power plants. The tradeoffs in new power plants you can do through regulation–just say, “Hey, you have to retire CO2-intensive plants at various dates, and you have to replace them with ones that meet various CO2 standards.” So that actually creates a market, in the sense that people have to buy those things. But it’d take a very small tax to fund even a significant level of R&D increase. And that’s using the term “R&D” very broadly, because in that $16 billion total that the AEIC called for, we had several things that are about pilot-plant deployment and financing. About one-third of it was not in traditional R&D. In energy we need to do the basic research. It’s materials science, it’s modeling, it’s storage, there’s a lot of things.

It is disappointing that some people have painted this problem as easy to solve. There are actually two articles in Scientific American where they allowed the author to say, “Oh, this is easy. Just go do a bunch of compressed air and sun,” or “Just go do a mix of things and it’s easy.” It’s not easy, and it’s bad for society if we think it is easy, because then funding for R&D doesn’t happen. If it was going to be easy, then that money really wouldn’t be necessary. But in my view it’s very necessary, and that’s despite the fact that if you take the innovation economy in the U.S., broadly defined, now versus 10 years ago, there’s a lot more energy activity. There’s many examples of that. You’ve got Silicon Valley, with people like [venture capital firm] Perkins. Vinod Khosla [of Khosla Ventures] was into it early and he’s got an amazing portfolio, but now there are many others doing it.